Time-varying correlation between stock market returns and real estate returns

Richard Heaney and Sivagowry Sriananthakumar

Journal of Empirical Finance, 2012, vol. 19, issue 4, 583-594

Abstract: Direct investment in commercial or residential real estate is found to provide valuable diversification benefits for Australian investors though this is not so evident for indirect real estate investment vehicles like listed Australian real estate investment trusts (A-REIT). Further, multivariate analysis of Australian real estate and share market quarterly returns, spanning the period from the 3rd quarter 1986 to the 3rd quarter 2009, suggest that the correlation between real estate returns and share market returns is time-varying. Finally, while all of the asset class correlation coefficients increased with the Global Financial Crisis period this broad movement in asset class correlation is not evident in during the Wall Street Crash of 1987.

Keywords: Real estate; Share market returns; DCC IGARCH(1,1) model; Time-varying conditional correlations (search for similar items in EconPapers)
JEL-codes: G11 (search for similar items in EconPapers)
Date: 2012
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Citations: View citations in EconPapers (32)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:empfin:v:19:y:2012:i:4:p:583-594

DOI: 10.1016/j.jempfin.2012.03.006

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